The first half of 2022 was marked by the acquisition of iXblue, a transforming operation for Groupe Gorgé. The combination of iXblue and ECA Group has created a French technological champion, leader in its markets. The group now has solid assets to support its ambitions: technological leadership, quality of teams, experience in the execution of major programs and ability to compete internationally. This is demonstrated by the orders received by ECA group during the first half of the year, with €60 million in new contracts, as well as the activity on major tenders on which the group is positioned. During the first half of the year, the preparation of the collaboration between the teams of the two companies has enabled to strengthen the execution of certain programs and the growth perspectives on the group's markets. The synergies between the two companies will allow this momentum to continue after the closing of the transaction, still scheduled at the end of September.
Contracts still well on-track, with execution improved by the combination with iXblue
Major milestones achieved in the Belgian-Dutch program this semester
The flagship program with the Belgian and Dutch navies, now representing a total of €500 million, reached important milestones during the first half of 2022. Following the customer's validation of the Critical Design Review in January, the first steps of the pre-production phase have been successfully taken: the sea trials of the Launch & Recovery System (LARS), one of the key points of the drones system, for the USV Inspector 125, took place in January; the inauguration of the new assembly site in Ostend, close to the mine-hunting training center for NATO countries, took place in June.
The combination between ECA Group and iXblue will also strengthen the technological developments on this program. As part of this contract, iXblue is providing several products integrated into the various ECA droness and ships: innovative FLS sonars (Front Looking Sonars), inertial navigation systems of various accuracies and acoustic positioning systems. The precise positioning of the different vehicles and the good communication between them are critical points of the demining system, which will be better managed by the integration of the two companies' teams.
Successful execution of the modernization program for the Latvian Navy
ECA Group has won the international tender for the modernization of 3 earlier generation mine-hunting ships in 2020. Each of the ships will be equipped with a UMIS drone system consisting of one A-18 underwater drone, two SEASCAN identification drones, 10 K-STER consumable drones, as well as UMISOFT mission management software. As a complete system provider, ECA Group is also in charge of the modernization of the ship's architecture to integrate the new Mine Warfare Data Center equipment (communication, navigation system, autopilot, drone system controls).
The program is proceeding as planned and several major milestones were achieved during the first half of the year, following the validation of the Critical Design Review at the end of 2021. The customer has taken delivery of the Mine Warfare Data Center, followed by the successful completion of Factory Acceptance Tests (mine control, command and identification systems). Delivery of the ships and drone systems is scheduled for 2024.
The complementarity between ECA Group and iXblue also improves the operational performance for the Latvian Navy. iXblue was selected by ECA to provide compact inertial units for drones, acoustic positioning systems and a GECDIS data processing and display module for this program.
As with other programs, the size of this contract can be increased through various amendments, covering operational maintenance and other services or options not included in the base contract. Initially at €20 million, it could reach €25 million or more in total, illustrating once again the strength of ECA Group's business model, which consists of supplying complete systems and maintaining them in operational condition for several years, thus generating recurring revenues.
Results for the first half of 2022 by division: good profitability in the Drones & Systems division and slight deterioration in the Engineering & Protection Systems division
Profitability remains uneven between the Drones & Systems division (19% current EBITDA margin) and the Engineering and Protection Systems division (7% margin). The results of the previous first half have been restated to take into account the exit of the 3D Printing division at the end of 2021 and the withdrawal from the nuclear doors business.
Income from ordinary activities by division
|(In € million)||H1 2022||H1 2021||Variation|
|Drones & Systems||Revenues||62,9||58,8||+7,1%|
|Current EBITDA margin (%)||18,7%||21%||-1,9 pts|
|Income from ordinary activities2||5,4||6,5||-1,0 M€|
|Engineering & Protection Systems||Revenues||34,2||32,2||+6,2%|
|Current EBITDA margin (%)||7,3%||8,3%||-1,0 pts|
|Income from ordinary activities2||1,3||1,3||+0,0 M€|
Drones & Systems
The +7% increase in revenues in the Drones & Systems division is the combined result of:
- The strong increase in the naval and maritime field (>70% of Drones & Systems revenues): +16%, both thanks to the BENL program and to other robotics and integrated systems contracts.
- Growth in on-board equipment and associated solutions for the aerospace sector (c.20% of Drones & Systems revenues): +15% growth. It was driven in particular by a significant flow of orders for emergency beacons.
- The decline in other activities, particularly industrial, which account for less than 10% of Drones & Systems revenues: -41% (maintenance equipment, production tooling, etc.).
More of details in the press release of July 27th.
The division's current EBITDA margin stood at 19% for the first half. It remains at a good level despite a drop of 2 pts and reflects:
- A slight improvement in gross margins, reflecting good execution and compliance with client delivery deadlines despite tighter supply conditions.
- The mobilization of significant resources on projects that are not yet generating revenue, such as responses to the several hundred million of euros of tenders in progress or the development of the AMR activity.
Amortizations have increased compared to last year, due to the increase in tangible and intangible assets on the balance sheet. As a result, the operating result of the Drones & Systems division amounts to €5.4 million.
Engineering & Protection Systems
This division now represents €34 million of revenues in the first half of 2022, generated by two activities: fire protection and consulting in engineering and technology. As a reminder, the technical doors business for the nuclear industry is now classified as discontinued operations (IFRS 5) and does not contribute to the published revenues, including in the historical data. Groupe Gorgé had previously announced during the 2021 annual results the plan to withdraw from this activity, which is still loss-making.
Revenue growth was driven by the continued development of the engineering consulting business, while revenues from the fire protection business were down slightly compared to the first half of 2021.
The current EBITDA margin of this division stands at 7%, down by 1 pt due to a temporary drop in the fire protection business. Operating income remained stable on a constant basis at €1.3 million.
Consolidated P&L of the 1st semester 2022
|(in € million)||H1 2022||H1 2021|| |
|Current EBITDA margin (%)||14,4%||15,8%||n.a.||-1,4 pt|
|Income from ordinary activities2||6,2||7,2||-1,0||-14%|
|Net income from discontinued activities||-2,8||-3,1||+0,4||-|
|Net income in group share||-5,8||0,3||-6,1||-|
Groupe Gorgé achieved organic revenue growth of +7%. Current EBITDA amounted to €14 m, close to the level of the 1st half 2021. Other non-current items of operating income increased by €1 m, almost entirely comprising acquisition costs of iXblue.
The tax charge is significant (€6.1 m) due to deferred taxes (€5.1 m) with no impact on cash. The forthcoming withdrawal of ECA Group from the Groupe Gorgé tax group, as a result of the structuring of the current operation with iXblue, significantly reduces the prospects of using the tax group's tax loss carryforwards.
Net income from discontinued operations (Baumert subsidiary) made a negative contribution of around €3 m, as this activity is still structurally loss-making.
All in all, Groupe Gorgé generated a net loss of €5.8 m, group share, penalized by discontinued operations and deferred taxes.
Solid cash generation and healthy balance sheet
The cash-flow from operations of Groupe Gorgé stood strong in the first half of 2022, at €11 million, generated mainly by the Drones & Systems division. As a matter of fact, the cash-flow from operations of this division increased by 3% vs H1 2021.
Net cash flow generated by operations is up sharply due to the improvement in working capital requirements (+9 M€). This variation is notably linked to the payment milestones of the Belgian-Dutch contract, whose payment cycle was unfavorable for the year 2021 alone.
Investments in the first half of the year were lower than in the first half of 2021 (€8.5 m versus €12.4 m) with the completion of the new drone assembly site in Ostend.
The group's debt has also decreased by €9 m, with nearly €10 m repaid in the first half. In the end, net debt will be €73 m at the end of June 2022 (compared with €80 m at the end of December 2021).
Mine-hunting: aging fleets in need of renewal in the coming years
The threat posed by underwater mines has increased this year, particularly in the Black Sea. A Romanian mine-hunting vessel was recently damaged after setting off a floating mine. The Latvian navy, which until now has been equipped with mine warfare ships built in the 1980s (as have Belgium and the Netherlands), will be the first navy to be equipped with a state-of-the-art robotic mine clearance system. Other navies, equipped with ships built in the 1990s, such as the Royal Australian Navy, have already started preparing renewal programs. Overall, of the more than 300 mine-hunting vessels in service in Europe, Asia-Pacific and the Middle East/North Africa, more than 70% are more than 20 years old and are rapidly becoming obsolete.
Almost all navies concerned are expected to have launched modernization or complete replacement programs to equip themselves with robotic systems by 2030, representing a market worth several billion euros. ECA Group, a leader in this field, is already identified as a key player in future calls for tender and has gained significant recognition thanks to the program with the Belgian and Dutch navies, NATO references in this field. The quality of ECA systems will be strengthened by the acquisition of iXblue and supports the group's ambition to win a significant share of this market.
Several tenders are already underway, notably in Australia and the Middle-East, representing a total of more than €200 million in potential orders. Their results should be known within the next 18 months. These various tenders have mobilized large teams since the beginning of the year.
Drone systems also for civil markets, such as hydrography and seabed mapping
The civil maritime markets also represent significant growth opportunities over the next decades, with multiple applications. Many players in different sectors will require the deployment of surface and underwater drones, particularly for mapping large areas and collecting data.
The installation of offshore wind turbines, tidal turbines and other sources of marine energy will require increasing needs for robotic solutions to carry out maritime operations. The European Union, for example, aims to have 60 GW of offshore wind capacity by 2030 and 300 GW by 2050, which implies around 50,000 km² of seabed that will need to be mapped for the technical needs of the installations and the impact studies of the surrounding areas.
iXblue has already successfully completed a mapping mission for the offshore wind project in the Bay of Saint-Nazaire in France. The company deployed its DriX USV, remotely supervised from the control center located in La Ciotat in the south of France (read the press release).
In order to offer the most efficient systems to existing and potential customers, the teams of both companies have already started to work together on the collaboration between their drones. A demonstration of the cooperation between the DriX surface drone and the A-18 underwater drone took place in September.
The robotization of all these missions will enable all of the group's current and future clients to carry out their missions more efficiently, more safely, at lower financial cost and with a limited environmental impact. The deployment of a ship represents the financial and carbon equivalent of the deployment of a hundred drones. Groupe Gorgé is already preparing to take full advantage of these important growth levers in the years to come.
The good performance of operations is leading the group to reiterate the guidance given at the beginning of the year: Groupe Gorgé had set itself the target of revenue growth of between +10% and +20% in 2022 for the Drones & Systems division and the maintenance of a good level of profitability. For the Engineering & Protection Systems division, the group is still aiming for a continuation of the current trajectory. However, the 2022 income statement will be transformed by the acquisition of iXblue.
Update on the timetable for the operation of combination of ECA Group and iXblue
In March, Groupe Gorgé announced the operation of combination of ECA Group and iXblue in order to create a world leader in cutting-edge technologies for critical applications, particularly in the defense, space and maritime sectors. A presentation of the operation took place at the beginning of April with the management teams of both companies to explain the strategy and the growth perspectives (link to the presentation). As a reminder, the new ECA Group-iXblue entity has the ambition to achieve revenues of more than €500 million and an EBITDA margin of around 25% by 2025-2026.
The last foreign administrative approval has been obtained and the closing of the transaction is expected to take place at the end of September, according to schedule.
About Groupe Gorgé
Groupe Gorgé is a high-tech industrial group driven by a strong entrepreneurial culture. The Group is present in drones, engineering and protection systems. The Group generated revenue of €202 million in 2021.
More information on www.groupe-gorge.com
Groupe Gorgé is listed on Euronext Paris Compartment B (GOE).
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Consolidated income statement
|(in thousands of euros)||H1 2022||H1 2021|
|REVENUE||96 625||90 384|
|Capitalized production||4 936||6 623|
|Inventories and work in progress||373||(1 236)|
|Other income from operations||4 025||3 120|
|Purchases and external charges||(44 346)||(41 349)|
|Personnel expenses||(46 909)||(42 499)|
|Tax and duties||(1 113)||(993)|
|Depreciation, amortization, and provisions (net of reversals)||(7 738)||(7 092)|
|Other operating income and expenses||316||204|
|INCOME FROM ORDINARY ACTIVITIES||6 171||7 162|
|Group share of the earnings of affiliated companies||-||-|
|Non-recurring items in operating income||(1 625)||(486)|
|OPERATING INCOME||4 546||6 676|
|Interest on gross debt||(1 375)||(1 074)|
|Interest on cash and cash equivalents||18||2|
|NET BORROWING COST (a)||(1 357)||(1 072)|
|Other financial income (b)||96||378|
|Other financial expense (c)||(42)||104|
|FINANCIAL INCOME AND EXPENSES (d=a+b+c)||(1 303)||(589)|
|Income tax||(6 101)||(2 639)|
|NET INCOME FROM CONTINUING OPERATIONS||(2 858)||3 448|
|Net income from discontinued operations||(2 777)||(3 133)|
|CONSOLIDATED NET INCOME||(5 635)||315|
|INCOME ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDER||(5 790)||339|
|INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS||155||(24)|
|Average number of shares||17 105 486||17 237 390|
Cash flow statement
|(in thousands of euros)||H1 2022||H1 2021|
|NET INCOME FROM CONTINUING OPERATIONS||(2 858)||3 448|
|Accruals||6 424||3 836|
|Capital gains and losses on disposals||(26)||(16)|
|Group share of income of equity-accounted companies||-||-|
|CASH FLOW FROM OPERATIONS ( before neutralization of the net borrowing cost and taxes)||3 539||7 268|
|Expense for net debt||1 357||1 072|
|Tax expense||6 101||2 639|
|CASH FLOW ( after neutralization of the net borrowing cost and taxes)||10 997||10 978|
|Tax paid||(984)||(1 068)|
|Change in working capital requirements||9 199||(10 812)|
|NET CASH FLOW FROM OPERATING ACTIVITIES (A)||19 212||(901)|
|Payments/acquisition of intangible assets||(5 262)||(7 081)|
|Payments/acquisition of property, plant and equipment||(3 530)||(5 317)|
|Proceeds/disposal of property, plant and equipment and intangible assets||31||-|
|Payments/acquisition & Proceeds/disposal of non-current financial assets||97||40|
|Net cash inflow/outflow on the acquisition/disposal of subsidiaries||115||-|
|NET CASH FLOW FROM INVESTING ACTIVITIES (B)||(8 549)||(12 359)|
|Capital increase or contributions||-||-|
|Dividends paid to parent company shareholders||-||(5 509)|
|Dividends paid to non-controlling interests||(327)||(276)|
|Other equity transactions||(143)||(1 666)|
|Proceeds from borrowings||917||90 537|
|Repayment of borrowings||(12 266)||(73 803)|
|Cost of net debt||(874)||(891)|
|NET CASH FLOW FROM FINANCING ACTIVITIES (C)||(12 692)||8 392|
|CASH FLOW GENERATED BY CONTINUING OPERATIONS (D = A+B+C)||(2 029)||(4 868)|
|Cash flow generated by discontinued operations||(3 913)||(6 493)|
|EFFECTS OF EXCHANGE RATE CHANGES||(5 943)||(11 361)|
|Effects of exchange rate changes of the year||17||4|
|CASH AND CASH EQUIVALENT AT THE BEGINNING OF THE YEAR||42 835||57 857|
|Restatement of cash and cash equivalents cash equivalents at the end of the year||(135)||(1 676)|
|CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR||40 685||51 317|
Consolidated balance sheet – Assets
|(in thousands of euros)||30/06/2022||31/12/2021|
|NON-CURRENT ASSETS||122 640||116 244|
|Goodwill||23 792||23 792|
|Other intangible assets||35 662||34 172|
|Property, plant and equipment||43 845||38 355|
|Investments in affiliated companies||6||5|
|Other financial assets||18 900||18 543|
|Deferred tax assets||429||1 378|
|Other non-current assets||-||-|
|CURRENT ASSETS||215 111||203 565|
|Net inventories||20 944||23 003|
|Net trade receivables||35 558||43 757|
|Contract assets||82 827||63 189|
|Other current assets||18 558||17 115|
|Tax receivables payable||16 324||13 375|
|Other current financial assets||196||217|
|Cash and cash equivalents||40 705||42 909|
|Assets held for sale||30 304||32 751|
|TOTAL ASSETS||368 056||352 560|
Consolidated balance sheet - liabilities
|(in thousands of euros)||30/06/2022||31/12/2021|
|EQUITY ATTRIBUTABLE TO OWNER OF THE PARENT||54 285||59 300|
|Stakes attributable to non-controlling interests||4 636||5 001|
|NON-CURRENT LIABILITIES||106 224||107 355|
|Long-term provisions||4 123||5 224|
|Long-term liabilities – portion due in more than one year||81 608||86 696|
|Lease liabilities – portion due in more than one year||12 582||11 972|
|Other financial liabilities||3 108||3 138|
|Deferred tax liabilities||4 639||150|
|Other non-current liabilities||164||175|
|CURRENT LIABILITIES||170 550||148 643|
|Short-term provisions||4 806||4 881|
|Long-term liabilities – portion due in less than one year||37 133||41 114|
|Lease liabilities – portion due in less than one year||3 683||3 279|
|Operating payables||34 741||32 843|
|Contract liabilities||45 555||22 504|
|Other current liabilities||44 369||43 780|
|Tax liabilities payable||263||242|
|Liabilities held for sale||32 362||32 260|
|TOTAL LIABILITIES||368 056||352 560|
Definitions of alternative performance indicators
< >Current EBITDA: Operating income before “depreciation, amortization and provisions”, “other items of operating income” and “Group share of the earnings of affiliated companies”.
< >Income from ordinary activities: Operating income before “other items of operating income” and “Group share of the earnings of affiliated companies”.Net Debt : Net debt excluding lease liabilities resulting from the application of IFRS 16 and including the value of treasury stock.
 See the glossary in the appendix for definitions of alternative performance indicators
 See glossary in the appendix for a definition of alternative performance indicators.
 Cash flow from operations after neutralization of the net borrowing cost and taxes and before change in working capital
 Representing ECA's addressable markets: Europe, Asia-Pacific, the Middle East/North Africa, excluding Russia, China and Iran
 H1 2021 column restated for discontinued operations under IFRS 5.